Public Citizen Testimony on SB 1003 — Compensation for Distributed Energy at El Paso Electric
Public Citizen Testimony on SB 1003 -- Compensation for Distributed Energy at El Paso Electric
To: Chairman Charles Schwertner and the Members of the Senate Committee on Business & Commerce.
CC: Sen. Phil King, Sen. César Blanco, Sen. Donna Campbell, Sen. Brandon Creighton, Sen. Nathan Johnson, Sen. Lois W. Kolkhorst, Sen. José Menéndez, Sen. Mayes Middleton, Sen. Robert Nichols, Sen. Judith Zaffirini
Via hand delivery and by email.
From: Kaiba White (kwhite@citizen.org, 607-339-9854) Public Citizen,
Re: SB 1003, El Paso Electric Distributed Solar Compensation – Public Citizen testimony
Dear Chairman Schwertner and Members of the Committee:
Public Citizen appreciates the opportunity to testify on SB 1003, relating to the compensation of a distributed renewable generation owner in certain areas outside of ERCOT, specifically El Paso Electric (EPE). While we oppose SB 1003 as written, we are hopeful that substitute language that we have worked on with the author will be presented to the committee and that we will then be able to support the bill.
Distributed solar is an important resource.
Distributed, customer-sited solar, often located on building roofs or covered parking, offers many benefits. By providing energy where it is needed, customer-sited avoids transmission constraints and can moderate the price of electricity to serve customers in the area. It’s not just customers with solar that benefit, but the system as a whole. Currently, there are about 2,600 megawatts (MW) of customer-sited solar on the ERCOT grid. With the right policies in place, it could grow to reach 97,000 MW, providing much needed local energy to the grid while saving all Texans money.
Fair compensation for energy produced is important for enabling distributed solar deployment.
Many customers with solar at their home or business don’t use all of the energy they produce at the time it is produced. While exporting energy to the grid can be avoided with a battery, batteries are still expensive and are therefore not an option for everyone, especially if there is no way to monetize their value. Thus, crediting customers fairly for the energy they send to the grid allows them to recover their investments in a reasonable time.
Unfair solar compensation rates and fees are common at Texas utilities, including El Paso Electric.
Has documented a very troubling trend of utilities in Texas replacing net metering with very low avoided cost rates for customers with solar. We contacted each of the 141 non-competitive utility in the state (co-ops, munis, and IOUs outside ERCOT) and were able to get solar compensation rate information from 127 of them. Utilities are taking advantage of the lack of regulation on solar compensation rates and are creating unfair rate policy that discourages the adoption of rooftop solar. At lease 75 non-competitive Texas utilities offer an avoided cost rate for customer-sited solar. The avoided costs rates range from 14% of the retail rate to 78% of the retail rate. The average value provided is 43% of the retail rate.1 Most utilities aren’t doing comprehensive cost-benefit analysis to support these rates.
El Paso Electric is currently required to compensate customers with distributed energy systems at their homes or businesses for energy they send to the grid at the same rate that that are charged for consuming energy from the grid. This policy is generally referred to as net-metering. However, the utility is not prevented from instituting fees for customers with distributed energy systesms. EPE currently charges residential customers with solar a $30.25 minimum bill, no matter how much energy they send to the grid. In contrast, other residential customers pay a $9.25 fixed montly fee. The utility is currently trying to replace the $30.25 minimum bill with a $5.96/kW demand charge for residential customers with solar, as part of the rate case it has filed with the Public Utility Commission. This proposed new fee could end up costing many customers with solar even more than the minimum bill and will be very difficult for residential customers to understand, predict or control/react to. Both the current and proposed fees illustrate the need for defined gaurdrails for establishing rates and fees for customers with solar. As written, SB 1003 would remove the one aspect of rate protection that EPE customers with solar currently have. Requiring EPE to do a comprehensive cost-benefit analysis to justify alternative rates and fees would protect customers from unfair rates.
Rates should be supported by robust analysis, not assumptions.
The National Standard Practice Manual for Benefit-Cost Analysis of Distributed Energy Resources describes in detail how to assess the value of distributed energy resources, including distributed solar.2 Public Citizen and other stakeholders have asked EPE to conduct a value of solar study to support any rate changes, but the utility has yet to do so. Instead, the utility is asking the Public Utility Commission to approve another method of charging customers with solar more without proving that any additional fee is justified. This is a consumer protection problem. Allowing a utility to set rates or fees without fully justifying them can harm consumers. As it is currently written, SB 1003 does not require EPE to do any cost-benefit analysis to support alternative compensation rates. The substitue language that we support would add that requirement.
The value of distributed solar is generally high.
A recent value of solar study conducted by Dunsky Energy and Climate Advisors shows the immense value that distributed solar provides in the ERCOT market ($.15/kWh in avoided costs + $0.12/kWh in environmental and health benefits).3 While these results aren’t directly applicable to El Paso Electric because the utility is outside of ERCOT, this study shows how the best practices should be applied for a local analysis and gives a current data point on the value of distributed solar. The biggest value comes from the avoided energy costs, which must be calculated based on the time of the solar energy production. Market price suppression and avoided ancillary services also contribute to the value. And for a utility, such as EPE, avoided transmission costs also add significant value.
Adding language to SB 1003 can help protect customers from unfair rates.
If the following language is added to section (f) of the bill, Public Citizen will support the bill.
If approving an alternative method for compensating a distributed renewable generation owner for electricity generated by distributed renewable generation facility or any other fees or rates that only apply to customers with distributed renewable generation facilities, the Commission must require the utility to conduct a comprehensive cost-benefit analysis using established best practices to justify all such rates and fees. The Commission must consider rates and fees for customers with distributed energy resources that reflect the value provided by those resources.